Loan Types

Advantage CDC is a direct lender for the SBA 504 loan program. However, we offer placement services for SBA 7(a) Loans, Community Advantage Loans, and Conventional Loans in an effort to help small business community succeed one way or the other.

504 Loan Program

Program offers up to 90% financing for Purchase OR Refinance of:

Existing land & building – borrower must occupy at least 51%

Land and construction of building – borrower must occupy at least 60%

Construction of building on Ground Lease

New or used equipment with remaining 10-year life expectancy

Loan Structure

Applicant/Borrower contributes 10% of total project cost in the form of cash / equity / subordinated financing

Lender (Bank or other approved lending institution) provides part of the financing and secures loan in first position against project property. Lender portion typically equals 50% of the total project cost.

CDC/SBA provides remaining, typically 40% of the total project cost and secures loan in second position against project property

Typical Structure for a $2MM Total Project Cost

Source

Amount

Percentage

Lien Position

Borrower

$200,000

10%

n/a

Lender

$1,000,000

50%

1st

CDC/SBA

$800,000

40%

2nd

Total Financing: $1,800,000 or 90%

504 vs. 7(a) vs. Conventional

SBA 504 Loan

SBA 7(a) Loan

Conventional

Down Payment

Usually 10%

Usually 10-30%

25% or more for Real Estate

Interest Rate

Fixed for 25, 20 or 10 years (See current rate on Home Page)

Typically variable rate ranges from Prime Rate + 1% to 2.75%

Typically 25-year amortizing, fixed for 5-years

Length of Term

25, 20 or 10 years for real estate

10 years for equipment

10 years for leasehold improvements

Determine by industry type

Annual sales restrictions

Number of employee restrictions

Determined by the lender

Loan Size

$125,000 to $5.5 million SBA portion only – total project cost could be $25 million or more

Up to $5 million

Determined by lender

Collateral

Generally, only project assets being financed

Personal guarantees of 20% or more owners

Business guarantee

Subject assets acquired by loan proceeds

Pledge of personal residence unless bank can justify why unnecessary

Personal guarantees of 20% or more owners

Business guarantee

Generally, project assets being financed

Personal guarantees of 20% or more owners

Business guarantee

Best Use

Owner-occupied (at least 51%) real estate. Finance of Equipment with remaining life expectancy of 10 years or more

Short-term and long-term working capital

Purchase an existing business

Refinance non-real estate related existing business debt

Purchase FF&E

Real Estate

Advantages

10% down payment!

Lowest rates of any government guaranteed business loan

Stretch debt over a long term to free up cash and working capital in the business